Variety: Why Warner Bros. Discovery Shook Up Its Film Business and What Happens Next

Story from Variety:

Toby Emmerich’s exit as chairman of the Warner Bros. Pictures group, and the ascension of former MGM film leaders Michael De Luca and Pamela Abdy, are just the latest instances of upheaval in what is already shaping up to be a tempestuous new era at the studio behind Harry Potter and Batman.

Emmerich’s ouster has been gossiped about for years, dating back well before the company was sold to Discovery. Still, his decision to leave for a production deal stunned executives on the studio’s Burbank lot, many of whom had worked with Emmerich for decades. It comes on the heels of a series of head-spinning directives from Warner Bros. Discovery CEO David Zaslav and his leadership team, who have been simultaneously obsessed with finding $3 billion in cost-saving synergies while expanding the number of movies the company produces. That mission also includes a mandate to land the hottest talent to make those projects, a directive that often comes with a steep price tag. Managing these warring impulses will now fall to De Luca and Abdy.

“Historically when new management comes in, they make a clean sweep,” says USC film professor Jason E. Squire, editor of “The Movie Business Book.” “Sometimes that’s a good plan, and sometimes it’s not.”

The move also comes as Warner Bros. Discovery has reimagined the structure of its film business. Zaslav was said to be enamored with what the Walt Disney Company has achieved in operating its media operations as a series of distinctive brands, with the likes of Marvel’s Kevin Feige, LucasFilm’s Kathleen Kennedy and Pixar’s Jim Morris and Pete Docter overseeing independent fiefdoms. He wants to do something similar with Warner Bros.

On Wednesday, Zaslav finally clarified this ambition by setting a new world order: De Luca and Abdy will run Warner Bros. Pictures and New Line Cinema, standing alongside Warner Bros. Animation and DC Films. All labels had previously reported up to Emmerich, who also enjoyed control over a slate of exclusive made-for-streaming features for HBO Max. It’s also not clear if executives such as New Line’s Richard Brenner and DC Films’ Walter Hamada will still have a role to play in the new configuration.

“It’s clear that they’re rebuilding,” one top Hollywood dealmaker noted to Variety. “Maybe with a sledgehammer.”

De Luca and Abdy’s purviews will shrink in the new constellation, and the two executives aren’t expected to have the same oversight that Emmerich maintained. They are expected to have control of New Line, but not DC or the animation arm. The move has also confused some people at the studio, because they feel it will create more silos. During AT&T’s brief ownership, which lasted from 2018 to 2022, the company invested a lot of time in breaking down barriers across the various divisions to create more opportunities for collaboration. The concern is that the new structure will lead to less cross-pollination across the media conglomerate.

Zaslav has been courting De Luca and Abdy heavily for months, impressed by their deep ties to the creative community and the success they had in raising the profile of Metro-Goldwyn-Mayer in the year and change before it was sold to Amazon. At MGM, a studio that had reputation for being a sleepy player, De Luca and Abdy provided a jolt of energy, landing splashy projects such as Paul Thomas Anderson’s “Licorice Pizza” (which scored the company’s first Oscar best picture nomination since 1988), as well as Joe Wright’s musical drama “Cyrano,” Ridley Scott’s starry crime story “House of Gucci” and Channing Tatum’s sleeper hit “Dog.” Skeptics, however, note that many of these films came with sizable budgets so only “Dog” became a veritable box office winner.

“De Luca was the wunderkind at New Line. Now he’s the veteran,” says Stephen Galloway, the dean of the Chapman University film school. “He has to prove he has a strategy for a studio where the feature film business is a shrinking part of the pie. Features are increasingly tentpole oriented, and that’s not what he’s been associated with. He’s moving into the IP and branded universe.”

In his new post with Abdy, they face a formidable task. Zaslav wants to signal to talent that Warner Bros. Discovery can be an attractive home for content — he was irritated about the discord that Christopher Nolan had with the studio over its handling of the release of “Tenet” during COVID and former CEO Jason Kilar’s decision to release the 2021 slate on HBO Max at the same time the films landed in theaters, sources said. However, Zaslav has also made it clear that he wants the studio to rein in costs when it comes to streaming titles, slashing budgets and making more films that cost less than $50 million. As part of that, Warner Bros. Discovery wants to spend less on marketing and on the splashy premieres and awards campaigns that many A-listers expect as part of their deals. Since taking over, Zaslav has also put several projects into turnaround, such as DC’s “Wonder Twins” and HBO’s sci-fi drama series “Demimonde” from J.J. Abrams.

“It’s curious that [Zaslav] has turned to proven, talent-friendly, old-school film executives,” Galloway says. “It’s certainly reassuring for talent in the wake of the disastrous move by Warner Bros. to shift everything to streaming.”

Galloway adds: “They have to turn around an impression that Zaslav is not feature film and talent friendly.”

Many questions surrounding the film division remain unanswered. Once the dust settles in the C-suite, USC’s Squire predicts, the industry will be closely watching De Luca and Abdy’s early moves.

“New management reads everything to come up to speed. They may reduce some projects and enhance others. They’ll start conversation with filmmakers to build for the future,” he suggests. “I wouldn’t be surprised if some titles go directly to streaming after new management takes a look.”

Of course, all of this will take time. Films take years to develop and produce, which means that De Luca and Abdy’s slate won’t come to fruition until 2024 or 2025. Zaslav is about to find out how much longer it takes to turn things around in the slow-moving movie business.

“They have a good reputation,” says Squire. “It’s worth it to give them time to see what happens.”

For Emmerich, the writing was on the wall even if the decision to leave was his own. Zaslav had talked to several prominent players around Hollywood, including former Fox and Paramount executive Emma Watts and Universal Pictures chief Donna Langley about different jobs, which left Emmerich vulnerable to wide speculation. And after years of serving a rotating crop of corporate masters, Emmerich, whose contract ran until 2023, seemed to have had enough.

“Toby has been the Teflon executive for years,” Galloway says. “Every time there’s been a shakeup, he’s risen the corporate ladder. He’s the most likable guy.”

In his memo to staff, Zaslav said that Emmerich will oversee a transition this summer, and stressed that the departing executive will remain in the fold as a producer. It’s a role that will require Emmerich to have a keen understanding of the kinds of projects that his former home now wants to make if he’s going to succeed.

“We have a deep history of world-class production here at Warner Bros. Discovery, and our intent going forward is to tell more of the best stories and to share them with an even bigger audience around the world,” Zaslav wrote. “Toby and his team will play an important and valued role in this endeavor, we’re so glad to have them join us, and we can’t wait to see what they will create in the months and years ahead.”

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